Loam Farm Update

With harvest 2015 receding into the distance, the figures for Loam Farm have been updated to reflect final yields and the latest round of selling.  Whilst physical yields have been good, they generally have not been enough to compensate for depressed prices.  Looking to 2016, if markets stay at current levels, and more normal yields are seen, this farm looks set to make a loss from its combinable crop production.

To recap, Loam Farm is a notional business, located in East Anglia, which has been running since 1991 and tracks the fortunes of combinable cropping farms.  It comprises of a 600 hectare (1,480 acre) combinable crop farm running a simple rotation of milling wheat, WOSR, feed wheat, and spring beans.  Of the cropped area, 240 Ha are owned and 360 Ha rented on FBTs.  There is a working proprietor plus one full-time man and harvest casual. 

Since the last update pre-harvest (see May article) it has become clear that yields have been very good across most of the UK.  This is reflected in Loam Farm’s figures, with a higher output for 2015 than previously budgeted.  For example the standard feed wheat yield on the farm is 9.4 tonnes per hectare, but it yielded 10.4 tonnes in 2015.  Only around 30% of the wheat has been sold to date (reflecting a low level of pre-harvest sales in the industry).  The unsold corn in store has been valued at a base feed price of £115 per tonne.  Therefore 2015 results could still improve or deteriorate from those shown, depending on future selling prices.  Working through the figures it can be seen that, at project sale prices, this farm will make a loss from production for harvest 2015 despite the high yields. 

One of the reasons for this that rent and finance costs have risen on Loam Farm over the last three years.  This is due to rent levels. Loam Farm has two FBT agreements; one came up for renewal in autumn 2013, the other in autumn 2014.  With prospects better at those times, rent rises to £375 per hectare (£150 per acre) had to be agreed to secure the land.  The effect on costs for the 2014 and 2015 years can be seen. 

The budget for the 2016 assumes that yields return to more normal levels.  As an indication of the prices used in the budget, feed wheat is in t £125 per tonne.  It can be seen that this results in a greater loss from production next year.  The subsidy figure reduces for 2016 as it is assumed that the farm’s ELS agreement ends, and the business does not gain entry to the new Countryside Stewardship Scheme.